That would be Nouriel Roubini of NYU who got his moniker back during the Great Recession, which he called pretty well in 2006. He did this clearly yesterday in an interview in The Intelligencer, although he has been pushing something like this for some time now, bringing in all sorts of things like climate change and more pandemics to reinforce this long run forecasr, although he thinks in a decade there may be a sufficient restrucuting of the economy to improve the situation. While he mostly does not talk about what should or could be done in the US, he seems to improve of a German type economy where the unemployment rate has risen only 1% in comparison to the massive increase towards 20% we have sseen in the US. Of course, Germany has managed the coronavirus much better than has the US, but they also have their Kurtzarbeit labor system that tends to preserve employment better during downturns, not to mention a broader social safety net as part of its social market economy. He says things might have been better if we had Bernie Sanders as president, but then notes that compared to Merkel in Germany and even Boris Johnson in UK, Sanders is a right winger.
“Dr. Doom” At It Again: Predicts 10-Year Depression
“Dr. Doom” At It Again: Predicts 10-Year Depression
Roubini thinks that various policy stimuli put in place in the US will lead to a temporary period of growth, but that this will pan out fairly soon with growth turning negative, leading to something more like an L or U shaped pattern. The key will be massive defaulting on debts as the impact of maassive unemployment works its way through via lots of non-payment on servicing those debts. He also argues that a factor in the longer term depression will be a resurgence of inflation partly due to the negative supply-side aspects of the depression due to deglobalization and higher costs of new technology, exacerbated by an emerging US-China cold war that will have the US paying more for 5G systems. This will in turn lead to higher interest rates, and these will add to the tanking of the debt load, which he notes could not stand it when the Fed wanted to push the fed funds rate above 2.5% at end of 2018 when the economy was doing very well.
I do not know if he is right, and I have seen a least one wisecracker argue that Roubini has predicted “the last 15 recessions out of 1,” but I do see some serious dangers ahead if mor is not done to provide support for those out of work and small businesses. Ending of enhance unemployment benefits in a situation of widespread unemployment in July would provide a negative shock, and another negative shock is beginning to come out of state and local governments as they deal with their mounting budget crises by massive layoffs. Unlike the federal government they cannot run budget deficits, and tax revenues are and will be way down, which points to the need for some serious federal aid to them. This was provided in the 2009 stimulus, of which about a third was such aid to state and local governments, although even that did not prevent those governments from continuing to be a drag on growth until as late as 2013. But as of now the Senate following Trump is refusing to move on this, invoking some sort of fantasy that it is only blue states having fiscal problems. As it is, most analyses see the shock to state and local finances being much larger now than then.
Roubini may be overdoing his “Dr. Doom” routine, but he certainly points out to dangers to what so far is at best a barely there nascent recovery.
I think it might be more like a Martin Van Buren style depression. With a few caveats. Trump will get re-elected, total turmoil in congress then once he’s out we will start to rebuild, but we are looking at a lost generation of younger millennials that are going to struggle.
Of course we are headed for another great-recession/great-depression. You don’t have to be a genius to predict that.
I do not believe that we ever fully recovered from the recession which began in December 2007. If we had fully recovered then the Federal Reserve would have restored the Fed Funds rate to something resembling the rate before that recession began. Instead the Fed Funds rate hovered at about .15% from January 2009 to November 2015. The rate finally drifted up to 2.4% in January 2019, only to drift back down after July 2019. It was .05% in April 2020.
After that 2007 recession began, a huge amount of Federal government money was thrown at large US banks and corporations in order to keep them solvent. The working class had to settle for the ability to draw unemployment a little longer than the norm. (The norm being designed to be as short as possible.)
The Federal Reserve never returns the Fed Funds rate to anything like the quarter before the last recession. The trends of the Fed Funds Rate since 1981 has been a descent lower and lower and lower. A symptom of a gross mismanagement if there ever was one.
Peak in quarter before recession
Year ————– Rate
Dec 1990 ——— 8.13%
Nov 2000 ——— 6.51%
July 2007 ——— 5.02%
Feb 2020 ——— 1.58% The 2nd quarter 202 is likely the beginning date of our next recession
Anyone with any curiosity at all would wonder if this trend was by design, or merely a side effect of the wanton damage done to the US economy by the federal government thru its tax cuts to the corporate world and the speculators in New York. The side effect being necessary after the US economy craters under their tender loving care.
An immediate quadrupling of the Federal taxes on corporations and speculators would go a little way in redeeming them.
But do not expect any increase in Federal taxes on corporations and speculators to be advocated by Dr Doom, or any other of the prognosticators in New York or in any university.
Moral bankruptcy set in long ago.